oriflame holding ag - reports.oriflame.com · oriflame holding ag fourth quarter 2018 investor...

Oriflame Holding AGFOURTH QUARTER 2018

INVESTOR PRESENTATION

Magnus Brännström, CEO

Gabriel Bennet, CFO

Nathalie Redmo, Sr. Manager IR

FEBRUARY 14, 09.30 CET

© O R I F L A M E C O S M E T I C S A G , 2 0 1 8

Important clarifying information IFRS

• Oriflame has implemented IFRS 15 Revenue from Contracts with Customers from 1st January2018. An early adoption of IFRS 16 Leases has been made to allow for all changes beingimplemented at the same time.

• To facilitate the comparison with the 2017 figures, the company has prepared fully adjusted 2018figures, excluding the impact of IFRS 15, IFRS 16 and related accounting alignments. The fullyadjusted figures are comparable with the already reported 2017 figures.

• Where not stated differently, the figures, graphs and comments in this presentation are based onthe fully adjusted 2018 figures, to facilitate the comparison with the 2017 figures

2


FOURTH QUARTERHIGHLIGHTS

3


4

Q4 highlights

• Sales €370.3m (€380.1m) -3% in €, +1% in lc

− Challenging market conditions and difficult comparables

− Shift in the geographical sales mix during the quarter:

• Asia & Turkey recorded a sales decline

• Improved sales momentum seen in the other Business Areas

− Q1 update: -7% QTD lc sales impacted by negative timing

• Operating margin 13.6% (14.8%)

− Currency impact -140 bps

− Net profit €32.9m (€35.8m)

• Strong net financial position

• Total dividend of €1.60 per share


5

Operational highlights

• Price/mix +4%

− Unit decline -3%

• Registered actives +1%

− Lc productivity was stable

• Increased share of sales from strategic categories

− An upgrade of the Optimals brand into New Optimals+ launched in China

− Wellness by Oriflame Probiotic supplement introduced

• Continued strong online development

− Close to 1 million monthly active users of the Oriflame app

− 96% of global orders placed online

23% 25% 27% 28% 29%

24%23%

23% 21% 19%

20% 19%20%

19%18%

18% 18%16%

16%16%

9% 9% 6%5%

5%

6% 6% 8%11% 13%

0%

50%

100%

2014 2015 2016 2017 2018

Wellness

Accessories

Personal and Hair Care

Fragrances

Colour Cosmetics

Skin Care


6

Regions

Sales

Registered actives

Operating profit

12%

(11%)

27%

(24%)

25%

(25%)

36%

(40%)

10%

(9%)

25%

(26%)

31%

(28%)

34%

(37%)

6%

(7%)

28%

(20%)

18%

(20%)

48%

(53%)


Latin America

• Sales force and productivity

− Registered actives +9%

− Lc productivity -3%

− € productivity -4%

• Negative timing of catalogues

• Improved performance in Mexico

− Successful recruitment campaigns

• Solid growth in Colombia and Peru, weak in Chile

• Operating margin -380 bps

− Negative currency movements

− Ongoing sales and recruitment driving initiatives

7

*Figures following the adoption of IFRS 15 and IFRS 16

Q4’18* Q4’18 Q4’17 Change YE’18* YE’18 YE’17 Change

Sales, €m 44.4 43.1 41.0 5% 151.3 152.9 157.5 (3%)

Lc sales - - - 6% - - - 2%

Operating profit, €m

5.4 4.2 5.5 (25%) 18.6 17.6 20.8 (15%)

Operating margin

12.2% 9.7% 13.5% - 12.3% 11.5% 13.2% -

Registered actives ‘000

306 306 280 9% 306 306 280 9%

0%

5%

10%

15%

20%

0

20

40

60

80

100

120

140

160

Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18

Net Sales LTM Op Margin % LTM€m

Market

Sales 2018

(2017) in €m

Change in

EuroChange in lc

% of

Business

Area Sales

% of Group

sales

1. Mexico 83.6 (88.5) (6%) 0% 55% 6%

2. Colombia

3. Peru


Europe & Africa



− Lc productivity +6%

− € productivity +6%

• Healthy growth in Central Europe

− Driven by main markets Poland and Romania

• Weak development in Western Europe

• Solid growth in Africa

− Strong productivity levels in Egypt and Nigeria

• Operating margin +210 bps

− Sales leverage

− Lower selling and marketing expenses

8

€m


Sales, €m 95.9 98.6 92.4 7% 322.2 328.5 324.7 1%

Lc sales - - - 7% - - - 1%


18.2 18.3 15.2 20% 48.8 47.6 45.2 5%

Operating margin

19.0% 18.6% 16.5% - 15.1% 14.5% 13.9% -


791 791 783 1% 791 791 783 1%

0%

5%

10%

15%

20%

25%

0

50

100

150

200

250

300

350

Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18

Net Sales LTM Adj. Op Margin % LTM

Market

Sales 2018

(2017) in €m

Change in

EuroChange in lc

% of

Business

Area Sales

% of Group

sales

1. Poland 57.1 (51.5) 11% 11% 17% 4%

2. Romania

3. Morocco


€m


CIS



− Lc productivity -7%


• Russia lc sales +4%

− Measures driving sales and recruitment in the market

• Healthy growth in Ukraine, Kazakhstan and Belarus

− Successful recruitment


− Negative exchange rates

− Ongoing sales and recruitment driving initiatives

9


Sales, €m 87.7 92.7 94.5 (2%) 303.0 316.8 356.8 (11%)

Lc sales - - - 5% - - - (3%)


10.9 11.8 14.6 (19%) 35.7 36.4 45.4 (20%)

Operating margin

12.4% 12.8% 15.5% - 11.8% 11.5% 12.7% -


966 966 859 12% 966 966 859 12%

0%

5%

10%

15%

20%

0

50

100

150

200

250

300

350

400

Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18

Net Sales LTM Adj. Op Margin % LTM


Market

Sales 2018

(2017) in €m

Change in

EuroChange in lc

% of

Business

Area Sales

% of Group

sales

1. Russia 198.6 (241.5) (18%) (8%) 63% 15%

2. Kazakhstan

3. Ukraine

€m


Asia & Turkey


− Registered actives -9%

− Lc productivity +1%


• Challenging market conditions in Turkey and Indonesia

• Weaker development in Vietnam

• Slowdown in China, lower end product launches

• Healthy growth in India

− Solid leadership development and higher activity levels

• Closure of operations in Myanmar



− Unfavourable geographical and product mix

10


Sales, €m 126.6 131.2 150.0 (13%) 484.6 503.0 510.2 (1%)

Lc sales - - - (8%) - - - 7%


31.0 30.6 39.1 (22%) 109.3 107.2 110.3 (3%)

Operating margin

24.5% 23.3% 26.0% - 22.6% 21.3% 21.6% -


1,042 1,042 1,145 (9%) 1,042 1,042 1,145 (9%)

0%

5%

10%

15%

20%

25%

0

50

100

150

200

250

300

350

400

450

500

550

Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18

Net Sales LTM Op Margin % LTM


€m

Market

Sales 2018

(2017) in €m

Change in

EuroChange in lc

% of

Business

Area Sales

% of Group

sales

1. China 206.2 (190.4) 8% 11% 41% 16%

2. Indonesia

3. India


FINANCIALS

11


Q4 income statement

• Sales mix

− Unit sales -3%

− Price/mix +4%

• Gross margin 70.9% (73.7%)


− Negative price and geographical mix effect


− Negative currency impact -140 bps

− Higher share of administrative costs*

− Lower costs for SIP and bonuses*

− Lower selling and marketing expenses

• Net profit €32.9m (€35.8m)

− Diluted EPS €0.58 (€0.62)

12


Q4’18* Q4’18 Q4’17 Change

Sales, €m 359.3 370.3 380.1 (3%)

Lc sales - - - 1%

Operating profit, €m 50.8 50.2 56.3 (11%)

Operating margin 14.1% 13.6% 14.8% -


3,105 3,105 3,067 1%

€m

0%

5%

10%

15%

0

50

100

150

200

250

300

350

400

Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18

Net sales Quarter Adj. Op Margin % Quarter

*The favourable impact from lower costs for the share incentive plan was offset by restructuring and other one-off costs.


FY income statement

• Sales mix

− Unit sales -5%

− Price/mix +9%

• Gross margin 72.6% (73.0%)


− Positive price/mix effect


− Negative currency impact -220 bps

− Higher share of administrative costs

− Lower costs for SIP and bonuses

− Lower distribution and infrastructure expenses

• Net profit €96.1m (€92.6m)

− Diluted EPS €1.69 (€1.62)

13


**Rounded

YE’18* YE’18 YE’17 Change

Sales, €m 1,278.8 1,318.9 1,363.1 (3%)

Lc sales - - - 3%**

Operating profit, €m 153.1 149.3 159.0 (6%)

Operating margin 12.0% 11.3% 11.7% -


3,105 3,105 3,067 1%

€m

0%

5%

10%

15%

20%

0

200

400

600

800

1000

1200

1400

Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18



Group currency impact on sales since 2010

14


Price/mix impact on sales

15

Average

9%

3% 3%

5%

9%

5%

4%

7% 7%

9% 9%

14% 14%

15%

16%

12%

11%

12%

11%

7%

9%

10%

14%

10%

7%

4%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Q4 '1

2

Q1 '1

3

Q2 '1

3

Q3 '1

3

Q4 '1

3

Q1 '1

4

Q2 '1

4

Q3 '1

4

Q4 '1

4

Q1 '1

5

Q2 '1

5

Q3 '1

5

Q4 '1

5

Q1 '1

6

Q2 '1

6

Q3 '1

6

Q4 '1

6

Q1 '1

7

Q2 '1

7

Q3 '1

7

Q4 '1

7

Q1 '1

8

Q2 '1

8

Q3 '1

8

Q4 '1

8


Q4 sales and operating margin analysis

16

Sales vs. PY

0,5

-3,0

0,0

-2,5

-2,0

-1,5

-1,0

-0,5

1,0

Units Price / mix

(4%)

LC Sales 1%

€ Sales (3%)

OP Margin vs. PY

4%

(3%)

FX

10

15

0

5

Dis

trib

. &

Infr

a.

Selli

ng &

Mark

eting

Adm

in.

OM

Q4 2

018

13.6%

Oth

er

incom

e

Pro

duct cost

Price / m

ix

0.0%

FX

OM

Q4 2

017

(1.5%)

14.8%

(1.4%)

0.7%

0.1%

(0.1%)

1.0%


YTD sales and operating margin analysis

17

Sales vs. PY

-5

-4

-3

-2

-1

0

1

2

3

4

Units Price / mix

(7%)

LC Sales 3%*

€ Sales (3%)

OP Margin vs. PY

9%

(5%)

FX0

2

4

6

8

10

12

Adm

in.

Dis

trib

. &

Infr

a.

OM

2017

FX

Pro

duct cost

Price / m

ix

Selli

ng &

Mark

eting

Oth

er

incom

e

11.3%

OM

2018

11.7%

(2.2%)

0.2%0.1%1.7%

(0.2%)

0.4%

(0.4%)

*Rounded


18

Actual Operating margin expansion YTD 2018 VS. LONG-TERM TARGET 2016-2020

(2%)

Oriflame has made certain assumptions to make / calculate an estimate of

the effects of currency, price/mix, etc. on the operating margin.

(14%)

(2%)

(2%)

9.5%

(2.8%)

7.0%

0.6%

2.0%

~15.0%

(3.5%)

3.8%

1.0%

0.0%

(1.0%)

0

2

4

6

8

10

12

14

16

18

20

0.2%

OM 2016 FX OM 2020Price / mix Product cost Admin. Other

%

11.3%Projected

Actual


Cash flow

Q4 operating cash flow €60.6m (€79.0m)

• Net profit before tax €-5.0m

• Non-cash items in net profit before tax €-4.0m

• Impact from changes in working capital and provisions €-9.7m

− Inventories €+10.0m

− Receivables, prepaid exp., asset derivatives €-2.7m

− Payables, accrued exp., liability derivatives €-18.3m

− Provisions €+1.3m

• Interest, charges, taxes €+0.3m

19

Q4 18* Q4’17 YE’18 YE ’17

Net profit before income

tax, €m46.3 51.3 134.9 133.2

Op. profit before changes

in wc, €m50.4 59.5 178.8 177.9

Change in working cap.

and provisions, €m20.8 30.5 0.8 0.1

Operating CF, €m 60.6 79.0 123.9 122.7

CF Investing Activities,

€m(3.4) (6.1) (11.8) (15.8)

*Figures calculated as per the new IFRS 15 and 16 standards

0

25

50

75

100

125

150

Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18

Operating cash flow LTM Capex LTM€m

0

50

100

150

200

Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18

Total inventory€m


Financial position

• Net debt at hedged values €48.4m (€4.3m net cash)

− Net debt €72.4m (€23.5m)

• Net debt at hedged values/ EBITDA (LTM) 0.3 (-0.02)

− Net debt/EBITDA (LTM) 0.4 (0.1)

• Interest cover (Q4): 12.5 (20.0)

• Interest cover (LTM): 8.9 (11.5)

Covenant disclosure

• Consolidated Net Debt to Consolidated EBITDA: 0.5 (covenant at ≤

3.0 times)

• Consolidated EBITDA to Consolidated Finance costs: 17.9

(covenant at ≥ 5.0 times / 4.0 times for RCF)

• Consolidated Net Worth: €152.1m (covenant at ≥ €120m / N/A for

RCF or in 2017 and 2018 Euro denominated private placement

notes )

20

* Adjusted for fair value movements of the USD private placement notes

€m

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

-20

0

20

40

60

80

100

Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18

Net Debt at hedged values* Net Debt at hedged values* / EBITDA LTM

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18

Interest cover (LTM)


-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

2.8

3.0

3.2

3.4

3.6

3.8

-20

0

20

40

60

80

100

120

140

160

180

200

220

240

260

280

300

320

340

Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18

Net Debt at hedged values* Net Debt at hedged values* / EBITDA LTM Net Debt / EBITDA Target range Net Debt / EBITDA Target range

21


€m

€m

0%

5%

10%

15%

20%

0

200

400

600

800

1000

1200

1400




22


€m

€m

0%

5%

10%

15%

0

50

100

150

200

250

300

350

400


Net sales Quarter Adj. Op Margin % Quarter

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

2.8

3.0

3.2

3.4

3.6

3.8

-20

0

20

40

60

80

100

120

140

160

180

200

220

240

260

280

300

320

340


Net Debt at hedged values* Net Debt at hedged values* / EBITDA LTM Net Debt / EBITDA Target range Net Debt / EBITDA Target range


IFRS 15 & 16

23


3 months ended

31 March

€’000 2018* 2018**

Sales 330,829 334,143

Cost of sales (100,330) (91,792)

Gross profit 230,499 242,351

Other income - 10,562

Selling and marketing expenses (115,989) (126,044)

Distribution and infrastructure (6,715) (22,063)

Administrative expenses (73,013) (74,210)

Operating profit 34,782 30,596

Financial income 7,948 7,948

Financial expenses (12,456) (11,277)

Net financing costs (4,508) (3,329)

Net profit before income tax 30,274 27,267

Total income tax expense (9,252) (8,593)

Net profit attributable to owners of the Company 21,022 18,674

*Figures following the adoption of IFRS 15 and IFRS 16.

**Figures excluding the impact of IFRS 15, IFRS 16 and related accounting alignments.

IFRS 15:

Individual performance discounts reclassified from

selling and marketing expenses to sales discounts.

IFRS 15:

Freight expense and income reclassified from

distribution and infrastructure expenses to cost of

sales.

IFRS 15:

By removing the other income line, all costs

associated with these revenues are directly

expensed. Other income is now reducing the

related overhead costs instead of being recorded

on one line.

IFRS 16:

The implementation of IFRS 16 is positively

impacting the operating profit due to the elimination

of operation leasing expenses which will be mainly

compensated by depreciation of the lease assets.

The depreciation is lower than the operating

expense.

IFRS 16:

Increased finance cost due to the recognition of

interest expense on the finance lease liabilities.

IFRS 15 & 16: Q1 2018 Income statement impact


12 months ended

31 December

€’000 2018* 2018**

Sales 1,278,752 1,318,891

Cost of sales (393,624) (361,518)

Gross profit 885,128 957,373

Other income - 41,515

Selling and marketing expenses (428,281) (481,911)

Distribution and infrastructure (28,491) (87,666)

Administrative expenses (275,290) (280,032)

Operating profit 153,066 149,279

Financial income 15,634 15,634

Financial expenses (33,766) (29,160)

Net financing costs (18,132) (13,526)

Net profit before income tax 134,934 135,753

Total income tax expense (39,504) (39,681)

Net profit attributable to owners of the Company 95,430 96,072

*Figures following the adoption of IFRS 15 and IFRS 16.

**Figures excluding the impact of IFRS 15, IFRS 16 and related accounting alignments.

IFRS 15:

Individual performance discounts reclassified from

selling and marketing expenses to sales discounts.

IFRS 15:

Freight expense and income reclassified from

distribution and infrastructure expenses to cost of

sales.

IFRS 15:

By removing the other income line, all costs

associated with these revenues are directly

expensed. Other income is now reducing the

related overhead costs instead of being recorded

on one line.

IFRS 16:

The implementation of IFRS 16 is positively

impacting the operating profit due to the elimination

of operation leasing expenses which will be mainly

compensated by depreciation of the lease assets.

The depreciation is lower than the operating

expense.

IFRS 16:

Increased finance cost due to the recognition of

interest expense on the finance lease liabilities.

IFRS 15 & 16: FY 2018 Income statement impact


CONCLUSIONSAND GOING FORWARD

26


27

Conclusions and going forward

• 2018 a year of mixed performance:

− Challenging market conditions

− Difficult comparables related to 50th year Anniversary activities

− Strategic categories increased their shares of the sales

− Online activities reached new levels

• Shift in the geographical sales mix during the fourth quarter:

− Asia & Turkey recorded a sales decline

− Improved sales momentum seen in the other Business Areas

• 2019 QTD: -7%

− Catalogue timing and public holidays

− Continued challenges in some markets

• Confidence in long-term strategy and in ability to return to profitable growth:

− Solid financial position

− Increased digitalisation

− Improved earnings opportunity


CAUTIONARY STATEMENT

Some statements herein are forward-looking and the actual outcome could be materially different. In addition to the factors explicitly

commented upon, the actual outcome could be materially affected by other factors like, for example, the effect of economic conditions,

exchange-rate and interest-rate movements, political risks, impact of competing products and their pricing, product development,

commercialisation and supply disturbances.

29

oriflame holding ag - reports.oriflame.com · oriflame holding ag fourth quarter 2018 investor...

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